Management Strategy

Key Management Issues Concerning the Medium-Term Management Plan

The Chiyoda Group has released a new medium-term management plan (MTMP) "Mirai Engineering" - A Grand Opportunity for the Future - for the period covering from fiscal 2017 to fiscal 2020. The aim of the MTMP is to transform Chiyoda to become a global top-tier “Integrated Engineering & Service Provider” in the fields of energy and the environment.
This will be achieved by structural reforms and growth strategies which anticipate global developments.

1) Assessment of the previous medium-term management plan "Seize the Moment, Open Up New Frontiers"
As a result of the former MTMP (FY2013 to 2016)the Chiyoda Group maintained its No.1 position in LNG and made a steady progress in new business areas including life science and new energy. However, the Group now faces challenges such as a realignment of the business portfolio including the offshore and upstream and further strengthening of risk management capabilities.

2) New medium-term management plan "Mirai Engineering" - A Grand Opportunity for the Future -
Given developments in the macro environment, such as changes in the supply and demand structure for energy, heightened awareness of the global environment, and digital innovation driving changes in the industrial structure, the Chiyoda Group will (a) contribute to the development of a sustainable society by providing technological and project execution capabilities, (b) achieve harmony between energy and the environment, and (c) create a business management approach that resonates with all stakeholders and earns their recognition and trust.

In the MTMP, the Group will seek to simultaneously pursue a transformation its business model with 10-year timeframe by;
1) Structural Reform, creating a management base for future growth and
2) Growth Strategy aiming at expanding business fields

Structural Reform

(i) Enhancement of risk management capabilities.
Along our technological advantages leading to improved earnings on a profitable path which ensures achievement of quantitative targets set for fiscal 2020, the Group will strengthen structure for execution and profitability management of EPC projects on a consolidated basis. We will also establish structure for expansion of business fields and transformation of business model.

(ii) Increase of basic earnings strength and enhancement of resilience to downturns
We will seek to expand basic earnings by technological and project execution capabilities and cost competitiveness, and by reducing consolidated fixed costs with the aim of balancing basic earnings and costs, and realign domestic and global operational structure.

(iii) Further expansion of human resource base
To strengthen our technical capabilities and project execution capabilities, the Group will restructure and operate a human resource development system with medium to long-term outlook and implement optimal assignment of human resources for continuous earnings growth. Through these efforts, we will foster a stronger corporate culture with a foundation of high loyalty and willingness to pursue new challenges.

Growth strategies

(1) Expansion of business fields and transformation of business model
In the fields of EPC, LNG, gas, petroleum, chemicals and metal resources will remain Chiyoda Group’s core businesses. In addition, we plan to expand into two key business fields of “energy” and “environment” (the vertical axis in the chart below), and aim to innovate EPC execution and diversify business and service areas by utilizing innovative digital technologies (the horizontal axis in the chart below).

(2) Building an Energy Value Chain business
The Group plans to enhance the upstream segment (entering and strengthening floater business), midstream (comprehensively strengthening and expanding LNG lineup) and downstream (building-up orders in petroleum, chemicals, and metal resources responding to shale opportunities and increasing demand from newly developing countries, and also, entering to the Gas to Power field).

In addition, the Group aims to move into the asset holding business and asset management service, which will lead to development of businesses & services field.

(3) Expanding global environmental engineering business
The Group will expand the field of new energy (integration of renewable energy with energy storage, electricity storage as well as dispersion energy), the environment, energy conservation and industrial facilities (technologies that reduce environmental impact and conserve energy for industrial facilities and metal resources fields), and life science ( Investigate opportunities and pursues appropriate business models in regenerative medicine field).

(4) Developing new business model in alignment with digital society
For innovative EPC execution and its application in the asset management business, we will work on cultivating capable human resources, partnering with cutting-edge digital technology companies and developing project IT with artificial intelligence (AI) and others.

“Mirai Engineering” derived from fusion the above three growth strategies, which integrated 1) Energy Solutions , 2)Environmental Solutions , 3) Technology and business model innovation to contribute a sustainable society with harmony between energy and the environment.

Quantitative targets

The Group regards fiscal year 2020 as a checkpoint for the next 10-year growth strategy, aiming to achieve consolidated net profit of 20 billion yen with double-digit ROE based on increased earnings strength through the structural reform and the strengthening of existing businesses. We look to continue expansion of earnings through the growth strategies toward fiscal 2026 and beyond

Investment strategies

The Group’s profit distribution policy is to allocate 50% of consolidated net profit each fiscal year to investment for business growth, while maintaining proper financial health.
In terms of investment areas, the Group will carefully select projects that will contribute to strengthen core business fields and realize the three growth strategies.
With respect to the investment size, the Group will set an aggregate of roughly 30 billion to 50 billion yen over four years, using cash on hand in addition to investment funds under the profit distribution policy, with assumption under investment discipline thoroughly.

Shareholder Return Policy

The Group will strive to achieve a consolidated dividend payout ratio at least 30% during the MTMP period.
Actual dividend amount each fiscal year shall be determined in consideration of progress under the Growth Strategy and the Investment Strategy together with operating environment. Minimum full-year dividend of 6 yen per share is set as the lower limit.

Link to the Medium-Term Management Plan presentation material